In part one of this series of articles on debt management we talked about managing your money and in part two we talked about making a detailed budget and indicated how this would help you bring your expenditure under control. Here, in part three, we will look at some ways in which you might be able to cope with problem debt.

Being in dept is not a problem in itself as long as you can afford to repay it in accordance with the loan agreements that you made when you borrowed the money. Problem debt begins when you can no longer afford to make these repayments. If you find yourself in this situation it is very important that you take some action immediately. There is a great tendency amongst people who encounter problems with debt to bury their heads in the sand. It is no doubt a truism to say that debts will not go away by themselves, but we will say it anyway: debts will not go away on their own accord.

The first thing you need to do in these circumstances is to produce a full and detailed account of all your debts. You should produce a complete and detailed list of everyone to whom you owe money. In this list you should state the total amount outstanding, any arrears you might have, the interest rates payable and your payment schedule.

Once you have made this list you should determine the most important debts; those that have the highest priority. The debts with the highest priority are those that non-payment would likely result in serious consequences; for instance failure to pay mortgage debt could mean that you might lose your home, and failure to pay against a county court judgement might mean that the bailiffs would visit you and take away your possessions. Failure to pay council tax debt and court fines could even result in your receiving a custodial sentence.

You should then work out how much you can reasonably pay towards these debts, with the prioritised debts being given preference. When you are clear on all these facts you should contact your creditors to talk to them about putting together a repayment plan. It is quite likely that some professional help on debt management would help you at this stage.

In part four of this series of articles we will look at priority and non-priority debts in more detail.

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